MARKET KNOW-HOW: Prestige for Free

When dialing the number indicated in an advert or on a business card of an entrepreneur, we are usually convinced that we are calling a real walk-in office. We visualize numerous clerks sitting at their desks and respectable offices occupied by top executives.

However, a phone number and an address at some top-class Moscow business center may prove to be nothing more than that. A call is taken by a professional secretary, who speaks foreign languages and is trained to receive and send fax messages, letters and e-mails, skillfully putting a calling customer through to the mobile phone number of the head of the company and taking a message from another caller.

The point is that this secretary is the only employee defending the company’s frontiers in the actual business center. Such services are by no means fraudulent, and are offered by what is called ‘virtual offices’.

“When the phone rings the secretary sees the name of the company and its profile on his or her computer screen. Depending on the instructions received the secretary either transfers the call to a mobile phone or to any other phone number of the client, or takes down a message,” says Natalya Kutergina of Regus Business Centers, a company that offers virtual office services.

Such an indispensable employee costs just $250-300 per month, the charge being that low because the secretary usually works for several companies simultaneously and is paid by each of them. If need be, the semblance of a real office can be made even more vivid, with business centers offering conference-rooms and executive offices for short-term use.

An extra charge and a bit of imagination, and the entrance to the room in question will be adorned with a plate bearing the company name or the name of its agent. For a moderate charge the staff of the business center will try their best to create the air of a real office. Indeed, converting the company’s virtual representation office into a real one will require an extra $40-50 per hour on average for a conference-room.

But those charges are barely comparable with the rates charged for renting a real office. According to Nikolai Smirnov, head of the office space department with Vesco Realty, the market value of renting non-residential areas in central Moscow runs up to $450-500 per square meter per year.

For a small company or a representation office permanently renting a real office is a disadvantage, especially if its head office is based outside Moscow.

Of course, the idea of substituting a team of employees with one secretary and renting a conference room for an hour was not invented by Muscovites. The fashion for virtual offices was brought to this country by foreign firms, which enlist such services so as to examine business opportunities in Russia before launching large-scale operations here. That period may last from 2-3 months to several years, in which time many companies do not risk having permanent representation in Russia.

Some companies work through affiliated firms or Russian partners; others prefer using virtual offices for communicating with their customers. The demand is high among foreigners, and hence Moscow business-centers and realty agencies, rendering such services, direct their efforts at western businessmen and try to meet European standards.

At the same time, Russian ‘virtual offices’ have their peculiarities. Unlike their European counterparts, they usually offer a standard set of services. According to Ivan Belyankin of Penny Lane Realty, in the West virtual office services are highly professional and very popular, with companies offering a wide range of virtual office packages designed to meet the individual requirements of their clients.

A company willing to set up a virtual office is free to choose the package that best suits its needs. In Russia clients are forced to adapt themselves to the schemes offered by companies offering such services, which may result in serious blunders and lead to undesirable exposure.

European companies use special software to optimize routine operations and enhance the quality of the services. In Russia such programs have yet to be applied. But, according to Irina Semirova of the Millennium House business center, talks on their acquisition are underway.

The application of new computer software is likely to bring about considerable improvement in the quality of virtual office services in Russia. But for such results to be attained, the virtual office sector needs to grow. Experts are convinced that this will happen.

So far, says Belyankin, the demand for that service is being created mostly by foreigners, while Russian firms rarely use the services of virtual offices. But, according to Semirova, the share of Russian clients is increasing steadily as Russian entrepreneurs seek to minimize costs more and more.

The service is popular among smaller companies, especially those based in the regions, or those that move to a new location but do not want to lose their old customers who know them at their previous address, or companies that are located on the outskirts of the capital but convinced that meetings with important clients and partners should be held in the center.

In most cases companies use virtual offices as an interim measure so as to safeguard themselves from the possible risks the Moscow market is fraught with. “We used such a service before opening a walk-in office,” says Maksim Uvarov, the general director of the pharmaceutical company Nutrifarm. “This helped us to save considerable costs at the early stages of the company’s development as well as to determine how many employees the company needed to hire for its real office.”

Admittedly, at times virtual offices encounter serious problems. Most often that happens when individual clients come into the office by accident. A Samara-based travel agency suffered the consequences of such an intrusion after it decided to open a representative office in Moscow without renting a walk-in office.

“We hoped that a confirmation by fax would be enough for our agents to book trips, while meetings with major partners are never held spontaneously, the parties usually agreeing on a time and place in advance and with an opportunity to prepare the venue,” the director of the company recounts.

But Russians don’t understand the difference between an agent and a travel operator and often take the first ad that catches their eye and insist on discussing the details of a trip in person, at the company’s office. “A couple of times ‘outsiders’ sought a meeting in the virtual office. After their request to talk with the managers was denied, rumors spread that our company was involved in fraud,” the head of the travel agency complains.

In the wake of such incidents the Samara agency decided to close its virtual office and to offer its products via friendly Moscow-based firms.

Law enforcers, it seems, do not see anything unlawful in pseudo-representatives. Perhaps, they have not received any complaints against virtual offices yet. A spokesman for the Main City Police Directorate of Moscow said only that no such complaints had been filed and no criminal probes into the disappearance of offices or other fraudulent schemes had ever been launched.

“There is nothing unlawful in working through a secretary who forwards messages to the company’s executives, while they are somewhere else,” holds Mikhail Goldman, a consumer protection lawyer.

“A crime only takes place if a company does not really work at all, while the secretary’s only task is to siphon cash from the clients for non-existent services.”

There is nothing unlawful in the company meeting its clients at an address different from the legal address where it is registered. As long it is not involved in more serious wrongdoings, then no faults can be found. Incidentally, professional fraudsters are unlikely to make use of virtual office services, because they usually seek to win the confidence of customers, and that is why such one-day firms, on the contrary, opt for impressive offices, staffing it with a number of clerks so as to give the impression of a stable and reliable firm.

PR experts assume that setting up a virtual office may prove to be a good move likely to contribute to the company’s image as long as it does not publicize the fact that the office is actually run by a lone secretary. According to Irina Zhivetskaya, head of the PR firm Respekt, a small regional company would benefit greatly from showing that it has a representative office in the capital.

That enhances the company’s image and, after all, it is not so important how the result is achieved. An address at a prestigious business center, where the company holds meetings with partners, also speaks for its reliability and solid financial situation.

“But I doubt many Russian businessmen would dare to openly admit their offices are ‘virtual’. If they conceal that and then the truth comes out, the company may get some very strange looks. It may arouse suspicion, at the very least, that they are unable to afford a normal office, and this already amounts to a serious blow to the reputation,” Zhivetskaya adds.

Clients of virtual offices in the West do not encounter such problems. London, for instance, has business centers geared exclusively towards offering virtual office services. Premises in such centers are not leased out for long periods, and this is quite normal. In Russia this kind of business is much weaker.

Even in Moscow only a few companies offer virtual office services. They include several real estate agencies and certain major office centers, such as the Millennium House or Regus business centers.

With a certain reserve telephone companies offering call center products and Internet providers, who open virtual representations for their clients on the Web, can also be included in the list. In the regions across Russia virtual office services are not offered at all.